Legislature aims to overhaul property insurance system

BRANDON LARRABEEMorris News Service

Published Friday, April 03, 2009

TALLAHASSEE -- A sweeping overhaul of Florida's property insurance system is the only thing standing between the state and a financial disaster, a coalition of business groups, environmentalists and lawmakers said Thursday.

The changes include reducing insurance policies that rely on the taxpayer-backed Florida Hurricane Catastrophe Fund, shoring up the state's Citizens Property Insurance Company and allowing companies to sell wind-insurance policies without state regulation.

Supporters said at a news conference Thursday that those revisions are needed to save the state severe economic pain or even bankruptcy if a major storm were to strike.

"If anybody asks me for investment advice, I'd send them in the direction of the Romanian prince who just sent me an e-mail telling me about an inheritance rather than advising them to invest a single penny in the current Florida insurance environment," quipped Eli Lehrer, a senior fellow at the Competitive Enterprise Institute, a Washington-based think tank that pushes for smaller government. "Without change, the state is in massive trouble.

"The entire Florida insurance apparatus, indeed, has become essentially insolvent."

A measure set to be heard today (Friday) by the House Insurance, Business and Financial Affairs Committee would increase Citizens property insurance premiums by up to 10 percent a year and would allow the CAT fund to gradually shed some of the risk it holds. As a reinsurance plan, the CAT provides insurance to companies who sell policies to property owners.

"Citizens Property Insurance Company and the CAT fund do not have sufficient reserves to pay the large claims that will come due when a large hurricane hits Florida," said Rep. Alan Hays, R-Umatilla. "If these two firms ... were private business, the state would have already shut them down."

Under the measure, the CAT fund would reduce the amount of reinsurance it provides by $12 billion over the next six years.

Meanwhile, Citizens' rates would rise until they were in line with what is needed to make the company solvent. The plan would also funnel $26 million of the new premium money to bankroll My Safe Home Florida, a program that assists property owners looking to fortify their homes against storm damage.

Another measure, by Rep. Bill Proctor, R-St. Augustine, would allow companies to create wind-insurance plans insulated from state rate controls.

State Farm Florida announced earlier this year that it would pull out of the state's property insurance market after the Office of Insurance Regulation turned down its request for a rate increase that would have averaged 47 percent statewide.

"To move to Florida and think you're going to have cheap windstorm insurance is tantamount to moving to Buffalo, N.Y., and think you're not going to shovel snow or buy a winter wardrobe," Proctor said. "It's not going to happen. There's no way to do it."

Ed Domansky, spokesman for the Office of Insurance Regulation, said the agency supported allowing Citizens' premiums to rise but didn't have a position on Proctor's bill, which he said dealt with wider policy issues.

"Certainly, that's going to lead to rate increases," he said. "The whole purpose of that is not for you to figure out a way to offer lower insurance premiums."